Thank you very much, Mr. Chairman.
I am pleased to have the opportunity to describe to the standing committee CIDA's role in the Government of Canada's CSR strategy, to provide some background information on the importance of the extractive sector to developing countries, and to give you an idea of the type of programming that CIDA has been doing and is planning to do.
As you've mentioned, my name is Chris MacLennan; I'm director general of thematic and sectoral policy. With me is Madame Hélène Giroux, who is the director general for South America; and Bill Singleton, who is CIDA's internal focal point on CSR. As members of the committee may recall, the government's CSR strategy required CIDA to create an internal focal point on extractive sector development issues, and Bill is currently serving in that capacity on an interim basis.
Before describing CIDA's role in the government's CSR strategy, I wish to draw the attention of the committee to one item in Bill C-300. In the interpretation section of the bill, subclause 2(1), there is reference to “the list of countries and territories eligible for Canadian development assistance established by the Minister of International Cooperation.” Such a list no longer exists. CIDA publishes in its annual report to Parliament the list of countries in which CIDA has actually made disbursements, but this is not the same as a list of countries that are actually eligible for development assistance.
That said, of course, the government, in February 2009, announced that as part of its aid effectiveness agenda, CIDA would concentrate 80% of its bilateral programming spending in 20 countries of focus. That is also not a list of eligible countries but simply where CIDA will be concentrating its efforts under the aid effectiveness agenda.
With this exception, Bill C-300 makes no direct reference to CIDA or its activities. However, because Bill C-300 is addressing issues in the same area as the government's CSR strategy for the Canadian international extractive sector, I would like to describe to the committee what CIDA is doing in relation to the extractive sector in developing countries.
As members of the committee will recall, the government's CSR strategy has four elements. One of these is entitled “Host Country Capacity-Building”, and it is this part of the strategy with which CIDA is directly concerned.
A large number of studies have been carried out about why mineral and hydrocarbon resources are all too often more of a problem than an opportunity for many developing countries. This is in contrast to the economic history of countries such as Canada, the United States, and Australia, which have been able to make productive use of natural resources as a source of economic growth, employment, and export earnings.
The common conclusion at which the various studies have arrived is that the most important single factor is the transparency and effectiveness of host countries' resource governance and management regimes. This includes the establishment of stable legal and fiscal regulatory frameworks to ensure sustainable resource management and development, and regulatory institutions and agencies responsible for regulating and overseeing sector activities.
In the absence of strong institutions, natural resources such as minerals, oil, and gas can become what, of course, is known in development as the “resource curse”. The curse can lead to a number of problems, including corruption, conflict, social unrest, and negative economic and environmental impacts. The revenues from the resources are volatile, which makes it difficult for governments to manage their spending. Finally, in some countries, revenues from minerals, oil, and gas have been used as a means of financing conflict, as many of you are aware.
The nature of the choices that developing countries must make are well known to Canadians: whether to extract the resources at all; how quickly to extract; whether to use national companies or rely on the international private sector; how to design the laws, regulations, and contracts that can produce the greatest benefits to the country and its citizens; and how to avoid or mitigate the environmental or social costs of extraction. Developing countries must also decide on policies and mechanisms for dialogue and stakeholder participation in extractive sector development. Each choice will have far-reaching consequences that can shape a country's development path.
CIDA's recent programming in individual countries in the extractive sector has been primarily in the Americas. In line with the principles of aid effectiveness, the orientation of this programming has been to support countries that have themselves set extractive sector resource management as a priority for their development planning.
In Peru, for example, CIDA has worked extensively with the national and regional governments and affected communities to develop and promote regulatory requirements for social and environmental management in the extractive sector. CIDA's support has included the provision of tools and expertise in the mining and hydrocarbon sectors and support for social, environmental, and multi-stakeholder dialogue, community participation, and conflict resolution.
CIDA has assisted Bolivia in establishing a tax collection unit. As a result, from 2004 to 2008, Bolivia realized a fourfold increase in revenue, amounting to well over $2 billion annually. Most of this money has been reinvested in public services and social supports.
In addition, CIDA is developing an Andean regional initiative, which will strengthen regional and local governments as well as community capacity to plan, develop, and implement sustainable development projects. The initiative will increase the well-being of the communities and enhance their capacity for engagement with extractive-sector firms.
At the multilateral level, CIDA is working on the extractive industries transparency initiative, or the EITI, in partnership with the Department of Foreign Affairs and International Trade and with Natural Resources Canada. The objective of the initiative is to introduce greater transparency into financial flows precipitated by natural resources in developing countries, with the objective of reducing corruption. CIDA has provided some of the funding for Canada's participation in the EITI multi-donor trust fund managed by the World Bank.
In addition, as laid out in the government's CSR strategy, CIDA is in the process of identifying an individual who will work with the World Bank on implementation of EITI in a number of countries in Africa.
For the future, CIDA's assistance to developing countries in their natural resource management will be carried out under the thematic priority of sustainable economic growth, which is one of the priorities set for the Government of Canada's international assistance envelope.
I've already described how natural resources can be a source of economic growth. Good resource management, especially in relation to environmental and social impacts, can help make growth sustainable.
We have made contact with our counterpart development agencies in other countries, such as Norway and the United Kingdom, to identify ways in which we might collaborate more effectively. In July, CIDA hosted round tables on CSR with the private sector and with civil society, and we are continuing that dialogue. We are working closely with DFAIT and NRCan on implementation of the other three elements in the government's CSR strategy.
I hope this brief description of CIDA's approach to the extractive sector in developing countries will assist the committee in its consideration of Bill C-300. Hélène, Bill, and I are open to questions you might have about CIDA's experience and how our work is contributing to the achievement of the government's objectives.
Thank you.
